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This is where enterpriserisk managementcomes in.
What Is Enterprise Risk Management?
It makes sure that everyone in the company is aware of potential risks and works together to handle them.
What Are the Main Features of Enterprise Risk Management?
Risk Governance
Establishing a clear structure is essential for an effectiveenterprise risk managementframework.
Leadership must define roles and responsibilities for risk management throughout the company, within each department.
They must also promote a culture of risk awareness, as well as accountability.
Often, arisk management committeeoversees the ERM framework.
Risk Identification
Identifying potential risks a company might face is also an important part of ERM.
Common categories of identifiable risks include strategic, operational, financial, compliance and reputational risks.
This helps decide where to focus efforts and which risks need more attention.
This includes ongoing reviews of risk assessments, tracking key risk indicators and reporting findings toappropriate stakeholders and management.
Communication and Transparency
An effective enterprise risk management framework encourages open communication and transparency throughout the company.
Types of Risks Addressed by Enterprise Risk Management
Again, every company faces its own unique risks.
However, there are general risk categories that mostenterprise risk management frameworksinclude.
Strategic Risks
Strategic risks are those that could impact the future plans and goals of a company.
Operational Risks
Any risks that can disrupt the day-to-day operations of a company fall under this category.
Compliance Risks
Compliance risks include anything that can be categorized as a violation of laws and regulations.
These have the potential to pose large losses, both financial and reputational, and fines for a company.
They can include everything from environmental violations,data management issuesand a host of other infractions.
These erode customer trust and loyalty and affect the viability of any company.
Any robust ERM must address these modern and ever-present threats.
Why Is Good Enterprise Risk Management Important?
Here are some benefits of a solid ERM.
This approach helps avoid problems brought on by teams working in isolation.
It also shows how different risks are connected, enablingmore informed decision-making.
Better project outcomes and smoother operations overall.
Stakeholder Confidence
Investors, customers and other stakeholders are understandably concerned about how organizations manage risk.
A strong enterprise risk management framework shows stakeholders that a business is proactive about identifying and managing risks.
This can build trust, boost the companys reputation and make it moreappealing to investorsand customers alike.
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